New insurance protects against loss in property value

Thursday

Ohio homeowners now can get a new sort of insurance policy for their home, one that protects against a decline in property value.

Ohio homeowners now can get a new sort of insurance policy for their home, one that protects against a decline in property value.

Home Value Insurance Co., a San Francisco business, launched the policy this week, saying it is the first of its kind in the country and Ohio the first state to offer it.

“Homeowners can protect every aspect of their lives, but there has been no product to protect the value of their home, which in most cases represents the majority of their net worth,” said Eric Hutchinson, the company’s executive vice president.

Although Home Value might be the first insurance company to offer such a policy, similar policies have been offered for a few years by financial companies that charge one-time fees instead of monthly premiums.

The Home Value premium is determined by the community in which a home is located and the home’s value. A typical Ohio homeowner would pay $35 to $45 a month, according to the company.

A person’s home value will be determined by how it tracked over time against the Case-Shiller index or by the sale price, whichever yields the least for the homeowner.

Imagine, for example, that a Columbus homeowner paid $182,000 for a home in September 2007 and sold the home for $150,000 in July 2011. During that time, Columbus-area home values declined an average of 10.7 percent, or about $19,500 for the $182,000 home, according to Case-Shiller.

Even though the homeowner lost $32,000 on the home, he would receive $19,500 in the insurance claim. However, if the homeowner sold the home for $170,000, he would receive only $12,000 — the difference between what he bought and sold the home for.

Even though central Ohio home values largely have stabilized since 2009, Hutchinson said enough mystery remains in the housing market to support the policies.

“The housing market is a new reality,” he said. “There’s a lot of uncertainty; there’s continuing volatility. This is meant to address that uncertainty.”

The product won’t be for everyone, but those who don’t expect to remain long in their home might find it attractive, said Mary Bonelli, spokeswoman for the Ohio Insurance Institute, an industry trade association.

“At first glance, it may best serve short-term residents who are concerned about home depreciation and receiving less on their home sale than they paid,” she said.

But Paul Dolce, who runs the financial-planning company Financial Solutions in Dublin, cautioned against such niche insurance policies.

“You have to remember, insurance is for catastrophic losses, losses you can’t afford to bear, which is why you have homeowners insurance or auto insurance,” he said. “I don’t know this product but I would be very skeptical about it.”

Home Value plans to sell policies through independent insurance agents. Hutchinson said about 60 Ohio agents have signed up, 21 of whom have gone through training, almost all of them in central Ohio.

Hutchinson said the company expects to sell the policies in 15 to 20 states by the end of next year toward its goal of going nationwide.

jweiker@dispatch.com

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